There have been rumblings since at least the beginning of the year that the entire fiduciary debate has been a ruse by the government.

By getting competing financial professionals busy fighting with each other, the government opened the door to begin a long orchestrated takeover of the retirement plan industry (see, “State-Sponsored Private Employee Retirement Plans First Step Towards Nationalized Retirement?” FiduciaryNews.com, December 1, 2015).

Read: SEC to set a fiduciary rule as part of 2016 agenda

How many of you missed this? How many of you still don’t believe this?

Well, we’re way past the “writing on the wall” part. The egg is about to hatch, and woe be to free market alternatives to retirement planning if private business keeps their collective heads buried deep within the sand or, more likely, continues with the distraction of the fiduciary standard debate.

It’s one thing for the government to head-fake the industry by creating a competing product while the industry was in the midst of a contentious civil war.

It’s quite another thing for the government to do so in a baldly hypocritical manner. (But perhaps I’m just being naïve.)

Read: For some, DOL fiduciary rule is proverbial road to hell

Let’s look at what the right hand has been doing and then compare it to the left hand of state-sponsored retirement plans:

In 2006, Congress, with bipartisan support, passed the Pension Protection Act. Among the retirement plan problems it meant to address was the unfortunately tendency for retirement savers to place long-term assets in short-term investments.

Professionals had long complained too many employees were picking stable income funds instead of the more appropriate equity funds. The 2006 PPA ushered in default funds which successfully increased long-term savers’ exposure to the proper long-term investments.

Then along comes the current administration which creates a retirement product geared towards long-term savers, but requires those savers to invest in only the most conservative of short-term securities.

Worse, as I wrote last week, there are already free-market alternatives that allow this same target demographic to invest in more appropriate long-term securities. As ESPN is so fond of declaring, “C’mon, man!”

Again, earlier this year, the administration declared war on conflict-of-interest fees through the Department of Labor’s controversial new fiduciary rule.

The intent had all the appearance of laudability. There’s academic research that undeniably shows conflict-of-interest fees result in significantly lower investment returns.

The vigor of the DOL only fomented the ongoing hostilities between opposing free-market business models. The White House, both directly and through its regulators, famously fanned these flames of war. All the while, mass media provided air cover with non-stop coverage of “the evils of Wall Street,” lumping so many babies into so much bathwater.

“Fiduciary! Fiduciary” was the imperative cry from the DOL.

But then a funny thing happened. The regulators appeared to have reneged on their promise of eliminating conflict-of-interest fees. It was as though they were purposely cementing them into the framework of the free market. It’s like they wanting to retain that stalking horse for future purposes.

Well, that future is now, as the DOL has unleashed a fusillade of support behind individual state efforts to vie with the private market.

Moreover, the DOL has given states a leg up on the competition. It has removed the one imperative it claims to want to place on all retirement plan providers--the fiduciary mandate.

Yes, for all the talk over the past several years of the fiduciary imperative, we come to discover the DOL never really meant it at all. It was all a ruse to damage the credibility of the free market.

In a move destined to send at least a few regulators to Dante’s Seventh Level (for those of you not familiar with The Inferno, that’s the lowest level of Hell, a place occupied by hypocrites), the DOL has opted to unilaterally remove ERISA requirements from states who sponsor retirement plans.

So much for decrying conflicts-of-interest. State politicians have an unenviable track record when it comes to corruption. And what better way to grease this behavior than by giving local elected officials the keys to the retirement savings vehicle of choice.

Ironically, for all the bad associated with the trend towards state-sponsored retirement plans, the one good is that it might put this whole fiduciary standard civil war behind us.

Assuming it’s not too late.

Instant Insights /

Will state-sponsored retirement plans end the fiduciary rule civil war?

More From HR Executive

Related Stories

Recommended For You